Volkswagen to invest $800 million, build new electric vehicle in U.S.

DETROIT (Reuters) - Volkswagen AG (VOWG_p.DE) said on Monday it was investing $800 million to build a new electric vehicle at its plant in Chattanooga, Tennessee, and scheduled a briefing with Ford Motor Co (F.N) for Tuesday on their efforts to forge a global alliance.

Dr. Herbert Diess, CEO, Volkswagen AG, speaks in front of an image of a van concept vehicle during the company's presentation at the North American International Auto Show in Detroit, Michigan, U.S., January 14, 2019. REUTERS/Jonathan Ernst

The German automaker said in an announcement at the Detroit Auto Show that it was adding 1,000 jobs at the Chattanooga plant and that electric vehicle production there would begin in 2022.

Volkswagen Chief Executive Herbert Diess said the company was considering building luxury Audi vehicles in the United States but that no decisions had been made.

German automakers have been under pressure from U.S. President Donald Trump to increase their investments in the United States. Diess and counterparts from German automakers BMW AG (BMWG.DE) and Daimler AG (DAIGn.DE) met with Trump at the White House in December to urge the administration not to go through with a threat to slap tariffs on European cars.

The Tennessee investment “is a signal to the government that we are really committed to the United States,” Diess told reporters at the auto show.

Ford and VW confirmed on Monday they would hold a joint conference call on Tuesday “to provide an update on the companies’ ongoing discussions regarding a global alliance.”

Diess and Ford executives ducked questions about how broad their alliance could be, beyond previously disclosed plans to collaborate on commercial vehicles and potentially midsize pickup trucks. Ford and VW have been discussing collaboration on electric and autonomous vehicles.

Both Ford and VW face mounting costs for developing electric and autonomous vehicles. Diess told reporters that VW could shoulder its ambitious $91 billion electrification plan on its own but was open to partnerships to increase economies of scale.

VW will use a modular electric toolkit chassis (MEB) in Chattanooga. VW designed MEB to be the basic building block for its EVs and it is intended to consolidate all of the vehicle’s electronic controls and reduce the number of microprocessors.

Volkswagen is building the first dedicated EV production facility in Zwickau, Germany, starting MEB production by the end of 2019.

The company will add EV production at facilities in Anting and Foshan, in China, in 2020, and in the German cities of Emden and Hanover by 2022.

“We obviously think electric vehicles are going to play a more and more prominent role,” said Tennessee Governor Bill Haslam, who took part in the announcement.

The first VW EV will be imported and arrive in 2020 and be a series-production version of a concept SUV EV shown last year in Detroit. VW said the vehicle would have the interior space of a midsize sport utility vehicle in the footprint of a compact SUV.

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VW Group plans to commit almost $50 billion (44 billion euros) through 2023 toward the development and production of electric vehicles and digital services. The VW brand plans to sell 150,000 EVs by 2020 worldwide, increasing that number to 1 million by 2025.

As part of VW’s more than $25 billion diesel emissions cheating settlement, it agreed to introduce three additional battery electric vehicle models, including the currently available e-Golf or its successor or replacement models through 2019.

Other automakers at the Detroit show are touting their EV efforts. General Motors Co (GM.N) showed off a rendering of a Cadillac EV after it confirmed that Cadillac would be the automaker’s lead electric vehicle brand.

Reporting by David Shepardson; Editing by Jeffrey Benkoe and Peter Cooney